Southwest Consulting Associates Blog

About the Report

The Government Accountability Office (GAO) released a study last month comparing Medicare Part B spending at hospitals participating in the 340B drug pricing program to non-340B program hospitals. The study has raised more questions because no patient outcome data was provided to support many of its claims.  The GAO analyzed 2008 and 2012 data from the Health Resources and Services Administration (HRSA) and the Centers for Medicare and Medicaid Services (CMS) to compare financial characteristics along with Medicare Part B drug spending for 340B eligible hospitals and non-340B hospitals.  The GAO study found that “per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher”, in some cases more than double, “at 340B DSH hospitals than at non-340B hospitals.”

Yesterday, August 4, 2015, the Office of Management and Budget (OMB) posted that the review of the 340B Program Omnibus Guidelines (mega-guidance) has been extended.  Yesterday marked 90 days that the Omnibus Guidelines had been before the OMB.  After 90 days, the OMB can extend the review period on a one-time basis for no more than 30 days or the review period may be extended indefinitely by the head of the rulemaking agency which in this case, is HRSA.  At this time, it is unknown which agency extended the review.   

In our last post, we covered the ins and outs of 340B recertifcation.  Here is a quick rundown of the recertification process and since the process can seem overwhelming, we thought we'd equip you with some helpful tips/best practices to make the process smoother for covered entities.

Michelle Herzog, Deputy Director of the Health Resources and Services Administration Office of Pharmacy Affairs, provided the HRSA update to 340B Summer Coalition participants this week in Washington D.C. She started off by saying that there were NO BREAKING ANNOUNCEMENTS THIS YEAR; HOWEVER, she did mention that HRSA had completed their first manufacturer audit in conjunction with the Office of Inspector General (OIG) last year and that it is an OIG restricted report.  The audit results will not be available to the public.  “HRSA is working on developing their own protocol for manufacturer audits and hope to conduct our own [audit] here soon in FY 2015,” Herzog said.

The proposed rule for 340B Drug Manufacturer Civil Monetary Penalties Regulation posted in the Federal Register June 17, 2015, defines the term “instance” in regards to overcharging a covered entity.  The rule states, “An instance of overcharging is any order for covered outpatient drug, by NDC [National Drug Code], which results in a covered entity paying more than the ceiling price” as defined in the rule “for that covered outpatient drug”.  The 340B program proposed rule also clarifies that:

On Wednesday, June 17, 2015, the proposed rule for 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation was published in the Federal Register for review and comments.  The Department of Health and Human Services (HHS) affirms that the “proposed rule is to provide increased clarity in the marketplace for all 340B Program stakeholders as to the calculation of the 340B ceiling price”.   The proposed rule requires a drug manufacturer to calculate 340B ceiling prices for each covered outpatient drug by National Drug Code (NDC) on a quarterly basis. The proposed rule outlines how to calculate the ceiling price, exceptions when the ceiling price calculation results in a zero or negative 340B price and how to calculate a new drug with no sales data from which to determine the 340B ceiling price.  All requirements for offering the 340B ceiling price to covered entities apply regardless of the distribution system.  The proposed rule declares that, “Manufacturers should consider the wholesaler role in this process and work out issues in good faith and in normal business arrangements regarding the assurance that the covered entity receives the appropriate price as outlined in the regulation”.

Amidst the controversy surrounding the 340B program, let’s take a step back with a little history of the 340B Drug Pricing Program to understand how we got where we are today.  The 340B program was created as part of the Veteran Affairs Act in 1992 and requires pharmaceutical manufacturers that participate in Medicaid to provide discounted prices on covered outpatient drugs to healthcare facilities that serve vulnerable patient populations.  Facilities must meet specific criteria to enroll in the 340B Program and become a “Covered Entity”. Covered entities must abide by program requirements which come from a combination of 340B statute, Federal Register notices, HRSA* policy releases and ‘frequently asked questions’ (FAQ) guidance published on the HRSA website or face savings paybacks and/or potential removal from the program.

We are certain that there will be clarification of the patient definition in the upcoming 340B Mega-Guidance but it is still not known exactly what will be proposed.  It’s important for hospital staff to review how they currently apply patient definition in their covered entity now so they will have a good understanding how the proposed guidance will affect their 340B program and be able to comment on the proposed Mega-Guidance accordingly.

Do you know the ins and outs of your covered entity’s 340B program?  When was the last time that an internal audit was performed on your policies and procedures?  Now is the time to assess your program because changes are imminent as we are seeing in the legislative arena.  The Energy and Commerce Committee considered including 340B language in the 21st Century Cures Act legislation before advancing the bill to the House of Representatives on Thursday, May 21, 2015.  A discussion draft of the 340B language circulated through the Energy and Commerce Committee (“the Committee”) as well as 340B Health (formerly SNHPA).  340B Health was given the opportunity to comment on the discussion draft and expressed concern to the Committee that there was not adequate time to evaluate the proposed changes.  Over 500 health system leaders sent letters to Congress urging them for more time to review the verbiage.  Ultimately, the draft 340B language was pulled from the legislation before the Committee voted to advance the bill.